TVA plots new future with stagnant or declining demand for power

TVA plots new future with stagnant or declining demand for power

February 11th, 2018 by Dave Flessner in Business Around the Region

Senior program manager Scott Walker points to a computer display showing power usage and availability in the Tennessee Valley Authority System Operations Center at TVA headquarters. (Staff File photo by Doug Strickland)

Photo by Doug Strickland /Times Free Press.

Staff Photo by Doug Strickland/Chattanooga Times Free Press - June 29, 2012. Balancing authority Cheryl Roman works at a computer station to match power load and generation as a digital display shows a current total load of over 30,000 megawatts in the TVA System Operations Center at TVA headquarters in Chattanooga, Tenn. on Friday. Several days of temperatures above 100 degrees will push TVA's power demands over the weekend.

Staff Photo by Doug Strickland/Chattanooga Times Free Press...

Photo by Doug Strickland /Times Free Press.

January brought the coldest streak of weather in the Tennessee Valley in a decade, setting three of the top 12 all-time winter peaks for TVA and the biggest one-day consumption of electricity in TVA's 85-year history.

But last month's weather-induced boost in power consumption probably won't last.

TVA's total power load last year was down by more than 10 percent from a decade ago and the federal utility projects demand for electricity will be essentially flat or down even more over the next decade. TVA, which long banked on annual electricity growth of as much as 7 percent, now predicts power demand in 2027 will be nearly 13 percent below the peak level reached 20 years earlier in 2007.

More energy efficient appliances, machines and heat pumps are reducing the demand for more electricity even as cheaper natural gas and self-generated sources of power from solar panels, wind mills and geothermal systems are capable of generating more power for customers in the Tennessee Valley from sources other than TVA.

The Tennessee Valley Authority, which helped electrify an impoverished Appalachian region during the Great Depression to help spur much of the region's growth over the past century, heats a bigger share of homes with electricity than in other parts of America and is being hit harder than many utilities by the drop in power demand. But TVA is certainly not alone in the impact of America's power shift.

"Every utility in America right now is trying to figure out how to handle the impacts of energy efficiency standards and the move to much more energy efficient lighting and heating," said Doug Peters, president of the Tennessee Valley Public Power Association, which represents the 154 municipalities and power cooperatives that buy and distribute TVA's power across its seven-state region. "When you are in a period of declining demand and energy efficiency and consumer-owned generation is putting more pressure on revenue recovery, it's a real challenge."

The drop in power demand marks a major power shift and reverses more than eight decades of rising electricity consumption since TVA was created in 1933. In response to the stagnant or declining demand for electricity, TVA is launching a long-range power plan this year to meet the needs of the new environment.

"Power demand is decreasing nationwide and the penetration of distributed energy (from solar, wind, gas and other self generation) continues to grow," TVA President Bill Johnson said. "There's been significant change since the last time we did an IRP (integrated resource plan) in 2015. We think it's time to refresh our IRP."

The 2015 Integrated Resource Plan and associated Supplemental Environmental Impact Statement provided TVA a 20-year blueprint that envisioned nearly 1 percent annual energy growth but no need in the next two decades to build a major new generating plant. The plan was developed with the input of many TVA stakeholders, including an IRP Working Group, the Regional Energy Resource Council and a series of public meetings and listening sessions.

Developing a new integrated resource plan for the future typically takes about 18 months or more to complete and could cost millions of dollars to develop, complete and publicize. But misjudging the market — as TVA did a generation ago when it launched an overly ambitious nuclear construction plan to build 17 nuclear reactors — can be far more expensive. TVA ultimately scrapped 10 of its originally planned reactors even after TVA spent more than $10 billion on them.

While energy efficiency and distributed energy and self-generation will limit demand for TVA power, new technologies such as electric-powered cars could boost power demand, especially during off-peak hours if car batteries are recharged more overnight or on weekends.

Cold weather like the sub-freezing weather in the Tennessee Valley during much of January or the hot weather during July and August also can boost TVA power demand, at least temporarily. On Jan. 17 when temperatures stayed well below freezing all day, TVA delivered 706 million kilowatt-hours, an all-time single-day record in TVA's 85-year history. In Chattanooga, EPB energy usage last month totaled nearly 606.4 million kilowatt-hours — the highest January usage in four years.

But TVA's power generation from its fleet of coal, nuclear and gas plants may face competition from renewable sources of generation that customers themselves may rely upon to supplement, or in some cases even substitute, for TVA power.

Jim Robo, CEO of America's third biggest energy company,

NextEra Energy, predicted last month that by the early 2020s, some solar or wind generation could be cheaper than existing nuclear or coal-fired power generation.

"By early in the next decade, as further cost declines are realized and module efficiencies continue to improve, we expect that without incentives, solar will be a 3- to 4-cent-per-kilowatt-hour product, below the variable cost required to operate an existing coal or nuclear generating facility of 3.5-5.0 cents per kilowatt-

hour," Robo told investment analysts in a conference call last month. "As the world's current leader in wind, solar, and storage development, we are uniquely positioned for the next phase renewables deployment that pairs low cost wind and solar energy with a low cost battery storage solution to provide a product that can be dispatched with enough certainty to meet customer needs for a firm generation resource."

Last year, Next Era, the parent company of Florida Power & Light, bought part of the Clean Line Energy transmission line planned to carry wind generation from Texas and Oklahoma into the Tennessee Valley and other parts of the Southeast.

In the face of such competition and market shifts, Johnson said the energy environment is as uncertain as any time in his 30 years in the utility industry.

TVA Chief Financial Officer John Thomas said TVA is already taking key steps to respond to the changing market conditions, and the integrated resource plan should help refine the options to pursue over the next 20 years.

"The challenge of our industry, which I think we've responded well to, is to align the infrastructure and the cost internally to the reality of what is happening in the marketplace," Thomas said. "What we have seen is a decline in load and revenue so a lot of our effort of the past five years has been to reduce our costs and and to face the new realities of what is happening in the market."

TVA has trimmed more than $600 million of annual operating expenses by closing its oldest coal plants, cutting more than 2,000 jobs and selling off some of its real estate, including its mothballed Bellefonte Nuclear Power Plant in Alabama nearly two years ago.

TVA is trying to reduce its debt along with its operating costs to respond to the changing marketplace and limit its annual interest costs, Thomas said. TVA is on target to reach its goal to reduce its total debt and long-term obligations to $21.8 billion by 2023, Thomas said. That would be down nearly $5 billion from a decade earlier and well below TVA's Congressional-imposed debt ceiling of $30 billion.

Contact Dave Flessner at dflessner@timesfreepress.com or at 757-6340


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